A Compelling Income Story

I normally wouldn’t rely on a single statistic or chart to influence an investment decision but the above chart almost changes that. What we see is that for the first time in almost 40 years (maybe longer if I had the data) the trailing dividend yield for Australian shares is sbove that of 10 year bond yields. In fact its not just above by a small margin but quite a large one, 7.2% for the S&P/ASX200 versus 4.3% for the 10year bond yield.

I did say ‘almost changes’ because there is an expectation of a signficant decline in dividends whilst companies’ profits decline and occasionally struggle to access capital. So whilst the trailing yield is 7.2% now, expectations are that it will be lower in the future…but lower than the 10 year bond yield??? Within the next year or two, I’d be very surprised.